Modern Slavery Statement

MODERN SLAVERY STATEMENT

FY2023

This is the Modern Slavery Statement (‘Statement’) of Questas Group Pty. Ltd. (‘Questas’) for the financial year ended 30 June 2023. This Statement is made pursuant to the Australian Modern Slavery Act 2018 (Cth) (‘Act’) and has been approved by the Questas Board of Directors.

REPORTING ENTITY

Questas (ABN 50 633 740 388) is the ‘reporting entity’ (as defined in the Act) covered by this Statement and the terms the ‘Group’, ‘we’, ‘us’ and ‘our’ refer to the entire Group (as defined below), except where the context otherwise requires.

STRUCTURE, OPERATIONS AND SUPPLY CHAIN

Structure

The Questas ‘Group’ consists of Questas and the following Australian subsidiaries in which Questas held more than a fifty percent (50%) direct or indirect ownership interest during the reporting year:

Questas Corporate Pty Ltd
Berendsen Fluid Power Pty Ltd
CCA Hardchrome Pty Ltd
The Hydraulic Warehouse Pty Ltd
Water Dynamics Pty Ltd
Pacific Hydraulics Pty Ltd
Babasine Pty Ltd trading as Beasley’s Hydraulics
Malcolm Thompson Pumps Pty Ltd
Engineered Products Group Pty Ltd trading as EPG Engines
Water Dynamics (NT) Pty Ltd
Southern Cross Darwin Pty Ltd
Nordon Cylinders Pty Ltd

Nordon Hydraulics Pty Ltd
Meadow Industries Pty Ltd
Swanson Industries Australia Pty Ltd
Swanson Industries (Engineering) Pty Ltd
Waratah Engineering Pty Ltd
Lansdowne Coatings Pty Ltd
Lovovo Pty Ltd
Lorosu Pty Ltd
Aussie Fluid Power Pty Ltd
Cord Nominees Pty Ltd
The Hardchrome Plating Points Unit Trust
Pointrange Pty Ltd
Rathmann Unit Trust
Australian Surface Technologies Pty Ltd
Isadraulics Pty Ltd

The Group is privately held and has the following current general business structure: The Questas Board consisting of:

Chairperson (non-executive)
Non-executive Director x 2
Company Secretary
Group Chief Executive Officer
Group Chief Financial Officer
Group General Counsel

Operations

The Group has direct business operations only in Australia, with 36 separate sites across Australia. We provide a diverse range of hydraulic, irrigation, pump and engine solutions to a range of clients in the mining, construction, agricultural and general industrial sectors in Australia and, to a lesser extent, internationally. Our services include distribution of products that have been procured both locally and overseas, as well as manufacturing, engineering and design and service and repair.

Supply Chain

Our supply chain includes providers of finished products for distribution, together with providers of component parts, raw, semi-finished and finished materials and consumables for the equipment we distribute or manufacture and sell. Our suppliers are located in Australia and at least five foreign countries.

Our supply chain also includes the suppliers of products and services that would typically be required by office, warehouse, workshop and manufacturing operations.

Our companies are located across 36 strategically selected sites Australia-wide

IDENTIFICATION OF RISKS OF MODERN SLAVERY PRACTICES IN OUR OPERATIONS AND SUPPLY CHAINS

Risks in our operations

All of our employees and operations are located in the Commonwealth of Australia and we comply with all Australian labour laws and other applicable employment related legislation and industrial instruments. Questas takes its employment compliance obligations seriously, has robust policies and processes in place and conducts periodic audits to ensure compliance with all applicable industrial instruments. Our internal processes have found no evidence of any modern slavery practices or incidents in our operations, and we do not believe there is any material modern slavery risk in this area.

Risks in our supply chain

We are not aware of any information which suggests that any of our suppliers had (or were aware of) any instances of modern slavery in their operations or supply chains.

Our due diligence completed through the end of the reporting period indicates that the higher risks of modern slavery in our supply chain likely reside principally in (a) the relatively few first tier suppliers that have been specifically identified as High risk in our due diligence, (b) direct foreign suppliers located in higher risk countries, and (c) indirect foreign suppliers in the second tier of our supply chain and beyond and for whom we still have quite low visibility of (collectively, the “Higher Risk Supplier Group”).

However, in both of the cases noted in (a) and (b) above, we do note that the same modern slavery risks inherent in any supply chain in tiers beyond the direct supplier (with heightened risk where the longer supply chain extends into higher risk countries) will also exist in our supply chain and we have not yet determined how to best address these risks, but we are working on finding possible solutions.

Our due diligence indicates certain recurring themes within the Higher Risk Supplier Group, including:

Some have indicated they have little visibility into the labour practices in their supply chains and no substantive assessment, verification or mitigation of modern slavery risk has been made in their operations or supply chain and no procedures are in place to facilitate such an assessment, verification or any mitigation.

Many do not have contract warranties and covenants in place that specifically and robustly address modern slavery issues in their procurement agreements.

Many do not have formal company policies in place re: modern slavery avoidance or Whistleblower encouragement and protection.

Many of our direct suppliers are not systematically imposing modern slavery risk mitigation obligations on their direct suppliers (e.g. obligations to implement robust contract warranties and covenants relating to modern slavery issues on their suppliers’ respective suppliers).

Some are unsure of the extent of use of low-skilled (including foreign migrant) workers in their operations or supply chains and/or whether or to what extent high risk factors relating to the use of such workers exist.

It must be emphasised that the Act is at the forefront of modern slavery legislation globally and few if any of our foreign suppliers are directly subject to any modern slavery legislation comparable to the Act, so it cannot reasonably be expected that they would have modern slavery risk programs in place when most Australian companies that are subject to the Act are still in the early phases of designing and implementing such programs. Currently and in the foreseeable near and medium term, the main impetus to most of our Higher Risk Supplier Group to improve their practices in this area will likely come from the encouragement and insistence of their Australian customers such as Questas and other major customers that may be subject to the Act and/or foreign legislation similar to the Act. We are on a risk identification and mitigation journey with our suppliers and expect to see our visibility into modern slavery risk in the supply chain improve, with corresponding improved mitigation actions implemented as we continue that journey.

ACTIONS TAKEN TO ASSESS AND ADDRESS MODERN SLAVERY RISKS

Assessment of risks

With the assistance of Compliance Pronto, an external consulting services provider, we have implemented and embedded an ongoing program to try and continuously improve our visibility into the labour practices in our supply chain and our ability to identify, assess and address risks of modern slavery practices in our operations and supply chain (the “Modern Slavery Risk Mitigation Program”). The Modern Slavery Risk Mitigation Program is intended to be continuously reviewed and improved as time goes on and currently includes –

Our Supplier Code of Conduct contains robust modern slavery contract warranties and covenants from suppliers. It includes recommendations that our suppliers “push” these same warranties and covenants up the supply chain by including them in their procurement contracts with their respective suppliers (our second-tier suppliers). A plan is in place to raise awareness of our Supplier Code of Conduct as part of the onboarding process for all new suppliers and new contract awards.

Targeted, customised “due diligence” of suppliers identified as being at highest risk for potential modern slavery incidents pursuant to item 3 above or otherwise. The due diligence surveys are designed to help validate and further assess the potential modern slavery risk of each supplier, by rating their modern slavery risk profile as High, Medium, or Low based on their responses to a series of questions relating to (i) their own operations and (ii) their supply chain. Due diligence responses are evaluated to determine whether and to what extent any additional follow up might be required, sensible and feasible in the circumstances, after which an action plan is meant to be created to implement such follow up in each relevant case.

Addressing Risks

Some specific key actions taken in connection with the Modern Slavery Risk Mitigation Program in the reporting period
include –

We travelled to one of our higher risk sourcing regions and visited 5 existing and prospective supplier sites (not previously part of the due diligence inquiries). We reviewed their business including size, references, suppliers, market, and policies. We also assessed their modern slavery awareness, supporting labour structure, and quality practices. Based on the site visits, we chose not to continue with one supplier as they were unlikely to comply with our Modern Slavery Risk Mitigation Program.

It is understood that we remain on a modern slavery risk identification and mitigation journey with our suppliers and expect to see our visibility into modern slavery risk in the supply chain improve and corresponding mitigation actions completed as we continue that journey. Our Modern Slavery Risk Mitigation Program has been designed – and will continue to be refined – with that in mind and with a view to “bring along” our entire supply chain with us on that journey to the greatest extent feasible.

HOW THE EFFECTIVENESS OF ACTIONS TAKEN IS ASSESSED

Questas will use key performance indicators (“KPIs”) to measure how effective our actions to assess and address modern slavery practices in any part of our operations and supply chain have been. KPIs include:

Operations notifications- reported issues in business operations.

Supplier engagement- percentage of suppliers responding to survey requests.

Supplier acceptance- percentage of suppliers accepting Code of Conduct; and

Level of high risk in supply chain- percentage of high risk suppliers in survey responses.

Over subsequent reporting periods, we will continue to review and enhance these KPIs and develop further metrics to assess the effectiveness of our actions. In addition to the KPIs, Questas also takes qualitative evidence derived from the actions described above and reviews it to determine if the supply chain response seems to be having the intended effect and moving in the right direction. Even though our Modern Slavery Risk Mitigation Program is still in its infancy and some of the noted actions were completed late in the reporting period covered by this Statement, we can already see evidence that the actions we have taken in implementing and executing our Modern Slavery Risk Mitigation Program are having the intended effect of better aligning ourselves and our supply chain with the purpose and intent of the Act in at least the following ways:

Increasing the level of awareness, understanding and appreciation at all relevant levels within Questas of the potential for incidences of modern slavery within our supply chain.

Establishment of the Modern Slavery Risk Mitigation Program has already begun to provide a significant increase in our visibility into our supply chain and the labour practices of our first tier suppliers by, among other things noted above, increased supply chain mapping and risk rating, initial risk assessment, additional follow-up due diligence where warranted and a process to obtain robust, binding supplier warranties about modern slavery incidents and risks in their respective operations and supply chains.

In particular, our updated due diligence survey has helped us start to get a better understanding of where “derivative” modern slavery risk might or might not reside in our supply chain. As an example, Australian suppliers who confirm that they source key products from higher risk jurisdictions may have their risk assessment level increased, while Australian suppliers who confirm that they do not source key products from higher risk jurisdictions may have their risk assessment level decreased.

We have seen evidence that our suppliers are also taking positive actions in this area.

The specific line of accountability within Questas for ownership and execution of the Modern Slavery Risk Mitigation Program remains intact and supported.

CONSULTATION PROCESS

During the reporting period this statement covers, we actively engaged and communicated with all members of the Group we own or control in the development of this Statement.

All members of the Group participated in providing the information relevant to their respective sites, operations and supply chains as required for the risk assessment actions noted above in this Statement, as well as consulting and/or liaising with respect to communications with the suppliers in their respective operational supply chains who were subject to a modern slavery due diligence review. An exception to the foregoing are very recently acquired Group subsidiaries who are still in the process of integration into the Group.

All members of the Group will have accountability for execution of the action plans and standard actions relating to their respective suppliers and will be kept apprised of the activities and outcomes noted in this Statement.

OTHER RELEVANT INFORMATION

Questas strongly supports fundamental human rights so the prevention of modern slavery and human trafficking and compliance with the spirit and intent – as well as the letter – of the Modern Slavery Act fully aligns with our standards and values as noted above. Our culture is
underpinned by our commitment to meeting our clients’
needs without compromising human or natural resources.
We are committed to providing and maintaining a safe
work site for employees, subcontractors and others
affected by our work.

In addition to continuing to take the actions indicated by our Modern Slavery Risk Mitigation Program and
further embedding it into our company processes and
culture, we will be considering ways we may enhance
the program such as, for example, how we can efficiently
audit compliance with the Modern Slavery Risk Mitigation
Program by ourselves and our suppliers and how we
can effectively and feasibly expand the program to reach
deeper into our supply chain beyond our first-tier
suppliers.

Having said that, the reality is that ensuring that slavery
and human trafficking is not taking place anywhere in
our supply chain, and especially at tiers beyond our
direct (first-tier) suppliers, will likely remain a significant
ongoing challenge for the foreseeable future. However,
we have implemented a risk-based approach and are
committed to achieving continuous improvement through
the actions described in this Statement.

Statement #2023-1834

APPROVAL OF STATEMENT

The Board of Directors of Questas, its principal
governing body, has unanimously approved this
Statement on 7 September 2023 and authorised
Mark Taylor as the responsible executive of Questas
to sign this Statement in accordance with the Act.

Mark Taylor
Group CEO